Velocity Futures Markets: Does the Fed Need a Structural Model?

Aaron Jackson () and Scott Sumner

Economic Inquiry, 2006, vol. 44, issue 4, 716-728

Abstract: Previous proposals suggesting monetary policy makers target private-sector forecasts have been shown to be problematic. As policy becomes more effective, private-sector forecasts become less informative. Under perfect stabilization private-sector forecasts provide no useful guidance to monetary policy makers about economic shocks. We illustrate a way around this circularity problem by creating a policy futures market linked to the ratio of the (realization of the) policy goal for next period and the current instrument setting. The implication is that extensive information gathering is unnecessary, weakening the argument that central banks need a structural model to conduct policy. (JEL E52, E44, E42) Copyright 2006, Oxford University Press.

JEL-codes: E42 E44 E52 (search for similar items in EconPapers)
Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1093/ei/cbj044 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:ecinqu:v:44:y:2006:i:4:p:716-728

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Economic Inquiry is currently edited by Preston McAfee

More articles in Economic Inquiry from Western Economic Association International Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().